First a little background for those of you that are not active in the “Real Estate Representation” field.
Foreclosures – the bank owned ones – are granted to real estate agents to sell on the behalf of the banks that own them. It is a big machine, these agents are known as others in the industry as “Foreclosure or REO Agents”. It is not easy to get one of these accounts granted as a real estate agent. Many have tried – Most have Failed.
But those that have been successful in getting the Major Banks to send them their assets to sell, they are in the Black in a Big Way. BTW – the Foreclosure Market has slowed – so some may have tapped themselves out and now are getting more and more in the Red with each passing day.
There are rules with regard to the agents the banks choose to represent them as the Foreclosure Seller. The agents have to do their due diligence with the inspections, asset management, broker price opinions, marketing, and all info given back to the bank with regard to the foreclosure property. The REO Agent cannot skim the vendors the bank hires – getting a piece of that action either.
The job is not easy, in some cases, the bank is not watching all of the time. Because of that, sometimes agents don’t give the best representation for the banks that enlist their services.
With the Bank Owned foreclosures – some banks don’t allow for their real estate agents to submit any of the offers received for a particular amount of time. The banks want to get the most for the foreclosure the agent is trying to sell. Their bottom line demands it, not to mention their share holders/investors. But, this is not always the case. In some cases, the REO agent is prohibited from submitting offers until the property has been on the “for sale” market for 7, 14 and in some cases 21 days.
During that time the Foreclosure Representative (the Realtor), is supposed to gather all of the offers received and prepare them for bank review. They are to make sure the offers are complete. If the bank needs the buyers to pre-qualify with themselves – that has to be done during this time. If the offers are to include proof of funds – that needs to be included. If they want Fico Scores – that should be attached within the offer as well. If it is not – it is up to the Foreclosure Agent to prod the Buyers Representative to give everything that is needed. (I should say a Good REO Agent will…)
During this time, the REO Agent – the one representing the bank in the sale of a particular asset, may get their own buyers that are interested in the property. This is where this Story Turns a bit Ugly. What if the agent representing the bank, has offers that other agents have submitted that will make the bank more money? However, they then receive an offer from their own buyer? How hard is it to disregard the other offers received and only submit the offer for their buyer? The answer to this question, “is it Depends on the Bank”.
Some Banks have mechanisms in their operational procedure that prohibits such Unscrupulous activity. i.e. their REO agents cannot represent buyers on the assets they are given to sell for the bank. REO agents have to identify any offers submitted, if they are representative of the buyer, in an upfront and honest manner. The REO agents won’t get an increased commission, even if they are representing the buyer on a REO asset they are selling.(this one has some teeth to it – this might be the solve all for this sad story…) etc.
Case and Point. A listing in a city in the Santa Clarita Valley. Listed well below market value – lots of activity, lots of showing, lots of offers. It was Verified that multiple offers with conventional financing – well exceeded the list price.
For argument sake – let’s say the property was listed for $500,000.00. The highest offer that was submitted was 20% down payment and for $620,000.00.
* KNOWLEDGE – (stand by for the rest) – When a property sells – it funds then records – It’s up to the Realtor to change the status of the property within the Multiple Listing Service to “Sold” and for what amount. Then that Data is recorded so are the Tax Assessor records and the Board of Realtors makes sure the numbers match etc. If the numbers don’t match – the agent is given a chance to correct it and if they don’t they get fined and could lose their membership as a Realtor!
Continued: This particular property went through that process. It was now rendering as Sold. That status is public information. And accessible from many different websites and systems. The real estate agents, who wrote offers for their clients, watch the recordings in the MLS just to make sure their clients were not duped. In this case – at least two agent’s clients were duped.
The property sold for $585,000.00 – Conventional Financing… There were two other offers, one we talked about above, over that amount with conventional financing.
Oh, that’s not all! It also shows up in the MLS who the “Buyers Agent” was. It was a member of the REO agent’s direct team. That is the second sin against the foreclosure bank.
What to do: I imagine the Bank that selected this REO agent is going to hear about this injustice. I would not be surprised if some type of suit is drawn up. Further fallout will probably have this agent never representing the bank in the sales of their Foreclosure Assets.
Bigger Picture: The Banks that are entrusting their real estate agents in the sales of their Foreclosure Assets will probably start to change their methods of operation even more.
Remember, when I talked about who sold the property? It was recorded in the MLS under the “Buyers Agent for the REO agent?” That will get found out by the broker being contacted. They may ask for “full disclosure” with regard to all offers that were received compared to those that were presented to the Foreclosure Owner(the bank). I’m sure there are more than a few really upset buyers that could have had this home as their own, but where GREED overcame FAIR.
Final Word – The banks – the foreclosure Banks – are Sellers. They should be given the representation that all sellers get. The Realtor Code of Ethics should be enforced. Just because the Bank has Deep Pockets – REO agents should not take advantage of that. If they are taking advantage of their Seller, like in this case – they will also take advantage of the sellers in the “standard and short sale” cases as well.
I’m off my soapbox. Be Safe – Connor…